Effective system of governance (ESoG)

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  • Effective system of governance (ESoG) and Own Risk Assessment (ORA) – the ‘new normal’ for pension scheme governance

    The role of the trustee board is fundamentally straightforward: pay the right benefits to the right members at the right time. However, if any elements of a scheme’s governance are not operating effectively, what once seemed straightforward can quickly seem quite challenging.

    The Pension Regulator’s (TPR) new single code of practice, due this summer, will bring big changes for pension scheme governance. 

    • Previously, trustees had to establish and operate internal controls which were adequate for the administration and management of the scheme and the safe custody and security of the assets.
    • Now, trustees must establish and operate an effective system of governance (ESoG) including internal controls, which must be proportionate to the size, nature, scale and complexity of the activities of the scheme.

    More than ever before, trustee boards are reaching out to professional trustees for assistance. At Dalriada, we are ideally placed to help as we have oversight of the complete governance spectrum. Our team of over 200 pensions professionals includes colleagues who helped construct the legislation relating to the ESoG and ORA. In our role as professional trustee for more than 300 schemes, we have a holistic view of the whole system of governance and can support your scheme’s Risk Management and Internal Evaluation Functions.

    Dalriada can help

    • evaluate your scheme risks
    • apply proportionality
    • prevent conflicts of interest and
    • ensure the trustee board has the appropriate Trustee Knowledge and Understanding (TKU) to challenge advisers.

    While other professional services firms can also assist trustees with the risk management function, they can do this only within their specific area of expertise. As an independent professional trustee, Dalriada sees the bigger picture across a wide variety of pension schemes, approaches scheme governance through a trustee lens and works in the best interests of pension schemes and their members, to ensure effective governance and better outcomes.     

    For example, our team encompasses a variety of personal, educational and professional backgrounds, and a wide range of disciplines that can bring real diversity of representation and thought to trustee boards, helping to avoiding decision making bias. And our experience and knowledge of working with schemes and advisers across the pensions industry means we understand what is required proportionately for each scheme’s specific circumstances, can evaluate the performance of advisers and provide challenge where appropriate.

    Find out more about risk management and internal controls.

    Own risk assessment (ORA) – not a ‘one and done’ exercise

    From the date TPR’s single code is published, trustees of schemes with 100 or more members must also “carry-out and document an own risk assessment [ORA]”. In TPR’s words, “The ORA is a substantial process, and the governing body may need to expand its risk assessments to fulfil our expectations.”

    TPR has indicated that trustees will have one year to carry-out and document their first ORA, from the date that the single code is published. Subsequent ORAs are likely to be required annually.

    So, not only will trustees need to ensure that the governance and administration of their scheme is effective they will also need to evidence this and, for schemes with 100 or more members, record their assessment of it.

    Ongoing requirements

    And don’t forget, the requirement for an effective, evidence-based and proportionate system of governance for your scheme is ongoing. Dalriada can help carry out and document subsequent ORAs at regular intervals and review these whenever there is a material change in the risks facing the scheme, or to its governance processes.

    We’ll help ensure your normal governance is the ‘new normal’ for the next 12 months – and the next  – and the next!

  • Get in touch with us

    Call us on 028 9041 2018 or fill out the form below and someone will get back to you.

    Trustee types

    We can deliver our services in a number of different ways

    • Non-executive trustee

      • Attend and participate in trustee meetings.
      • Work collaboratively with existing trustees and sponsoring employers.
      • Provide unique innovative approaches to the challenges schemes face.
      • Monitor the scheme's investment strategy and performance.
      • Provide strategic direction.
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    • Sole trustee

      • Experienced team working behind each sole trustee.
      • Single point of contact.
      • Work closely with the scheme’s service providers and advisors.
      • Reduces need for sponsoring employer monitoring.
      • Invite employer and stakeholders to attend formal trustee meetings.
      Find out more
    • Chair of trustees

      • Provide input and prepare agenda for trustee meetings.
      • Attend and chair trustee meetings.
      • Review and approve the minutes of the meeting.
      • Monitor actions arising and feed back on progress.
      • Also a strong, experienced and knowledgeable independent trustee.
      Find out more
    • Executive trustee

      • Maintains high quality professional services.
      • Strategic direction and full control.
      • Single point of contact.
      • Saves scheme time and money.
      • Access to our ground breaking technology, Mantle®.
      • Live administration and actuarial data.
      Find out more

    Key contacts

    Our team responsible for Effective system of governance (ESoG)